Utility cooperative

Utility cooperative

A utility cooperative is a type of cooperative that is tasked with the delivery of a public utility such as electricity, water or telecommunications to its members. Profits are either reinvested for infrastructure or distributed to members in the form of "patronage" or "capital credits", which are essentially dividends paid on a member's investment into the cooperative.[1]

Each customer is a member and owner of the business with an equal say as every other member of the cooperative, unlike investor-owned utilities where the amount of say is governed by the number of shares held.

Many such cooperatives exist in the rural United States, and were created by the New Deal [2] to bring electric power and telephone service to rural areas, when the nearest investor-owned utility would not provide service, believing there would be insufficient revenue to justify the capital expenditures required. Many electric cooperatives have banded together to form their own wholesale power cooperatives, often called G & Ts, for generation and transmission, to supply their member-owners with electricity.

Many utility cooperatives strive to bring the best service at the lowest possible cost, but often the high cost of maintaining the infrastructure needed to cover large, rural areas without the support of large cities as a rich customer base causes prices to be high. However, a few such co-ops have managed to tap into urban markets (due to growth into previously rural territory served by the co-ops) and have proven to be very cost-effective.

In Finland the telephone network was largely built by telephone cooperatives. Instead of a telephone subscription, a telephone stock is bought; there is also a lively secondary market for telephone stocks. The largest cooperative, known originally as the Helsinki Telephone Association (now Elisa Oyj) was founded in 1882. Today, cooperatives such as PNWISE are working to bring broadband access to rural areas of the United States by the same means.[3] In the UK, the Phone Co-op was set up in 1998 to provide telecommunications services, and in 2011 Midcounties Co-operative launched Co-operative Energy to supply electricity and gas.[4] As part of the community wind energy movement, Energy4all has sponsored the establishment of a dozen or so wind energy co-operatives.[5]


Seven Principles of Cooperatives

Several cooperatives list on their respective websites the Seven Cooperative Principles (also known as the Rochdale Principles) listed below, which are a general statement of how a cooperative operates (as opposed to traditional investor owned utilities):

  • Voluntary and Open Membership—Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
  • Democratic Member Control—Cooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions. The elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote) and cooperatives at other levels are organized in a democratic manner.
  • Members’ Economic Participation—Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.
  • Autonomy and Independence—Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.
  • Education, Training, and Information—Cooperatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives. They inform the general public, particularly young people and opinion leaders, about the nature and benefits of cooperation.
  • Cooperation Among Cooperatives—Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
  • Concern for Community—While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members. (One of the ways that cooperatives and their member-owners participate is through Operation Roundup, whereby a member can voluntarily have their electric bill rounded up to the next highest dollar with the difference placed in a fund to be distributed to local charities.[6] For example, a customer participating in the plan with a bill of $105.37 would see a bill for $106.00, and the remaining $0.63 credited to the fund.)

Electric Cooperatives

There are two types of electric cooperatives, distribution cooperatives and generation and transmission (G&T) cooperatives. Distribution electric cooperatives serve end-users, such as residences and businesses, who make up their membership. Generation and transmission cooperatives typically sell wholesale power to distribution cooperatives and are cooperative federations owned by their member co-ops.


Most electric cooperatives in the United States carry the name "electric cooperative" in their name, which makes it easy to identify their organization. Most cooperatives carry a name that identifies or explains some aspect of their service area. For example, Bluebonnet Electric Cooperative in Texas is named after the Bluebonnet which grows naturally in its service area and A&N Electric Cooperative in Virginia, is named so because it serves Accomac County and Northampton County. For years after the Rural Electrification Administration was established, many rural residents in the US called cooperatives, regardless of their name, "REA" and would in turn say they were served by REA instead of the cooperative name if asked who their electric provider was. Today, some cooperatives, though, either by choice or by the guidance of state charter laws, carry a variation of the cooperative name. These include:

  • Electric Cooperative Association
  • Rural Electric Association
  • Rural Electric Cooperative
  • Rural Electric Cooperative Corporation (RECC)- Mainly used in Kentucky [1]
  • Electric Membership Corporation (EMC)- Used in many states, such as North Carolina, Georgia, Tennessee, Alabama, etc.
  • Rural Electric Membership Corporation (REMC)
  • Electric Power Association (EPA)- Mainly used in Mississippi
  • Power Cooperative
  • Energy Cooperative

Several states have another variation of the utility cooperative and which are known as Public Power Districts (PPDs) in Nebraska and Public Utility Districts (PUDs) in Oregon and Washington. In both cases, the laws that created these 'quasi-cooperative' utilities were created with the specific intent of taking over territory being served by privately-owned power companies in those states. Nebraska's conversion from a mixture of power companies serving the state to a public power empire spanned the 1940s (the last privately-owned utility line into the state being cut on December 29, 1949), with the creation of the PUDs in the Pacific Northwest starting about the same time and continuing with varying degrees of success over the following two decades. The key difference between a PPD/PUD and a cooperative is that PPDs/PUDs are publicly controlled by residents of a state or local area and run more like a municipal power system than a cooperative system. A cooperative is owned and operated by the customers they serve within their designated service area. Cooperative owners have voting rights to elect the cooperative's board members each year and generally have more say in the operations than other utility forms.

Peer associations

Small cooperatives often band together to achieve economies of scale, share expertise and stand together on regulatory issues. There are several state-wide (and in Canada, province-wide) associations of cooperatives, including Kentucky [2] and Nova Scotia [3] [4][5].

See also


  1. ^ Explanation of Patronage or Capital Credits
  2. ^ Rural Electrification
  3. ^ "Could Utility Cooperatives be the Answer to Rural Broadband?". accel-networks.com. http://www.accel-networks.com/blog/2009/08/could-utility-cooperatives-be-answer-to.html. Retrieved 2009-08-04. 
  4. ^ http://www.cooperativeenergy.coop/
  5. ^ http://www.energy4all.co.uk/
  6. ^ Operation Roundup

External links

Wikimedia Foundation. 2010.

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